Can you own options in an ira?

While investors may not be able to trade all of the options strategies out there, they aren't limited to one or two. Their options include strategies based solely on options that they can use to speculate without owning the shares, as well as hedging strategies to use with the shares they own. Many individual investors want to use options trading to generate income, but are not sure if they can do so or not in their specific investment accounts. In fact, most individual retirement accounts (IRAs) can operate with options, as long as they request the correct setup.

This includes traditional, cumulative, Roth, Simple and SEP IRAs. Where most investors can't negotiate options is in their employer-sponsored retirement plans, such as 401 (k), 403 (b) and 457 plans. Since IRA rules do not allow margin trading, the types of option strategies allowed in an IRA are limited to those that do not require margin coverage. The Tier 1 options strategy encompasses purchase transactions.

The main level 2 strategies are buying call or put options and put options with cash guarantee, a strategy equivalent to writing covered calls. Level 3 authorization allows for option distribution strategies with defined risk profiles. Each broker sets their own limits on the option strategies allowed in an IRA account. Check with your broker to see what strategies will be approved for your account.

The disadvantage of using your IRA money to trade options is the limitation of the options strategies that can be used with IRAs.